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Published January 4, 2007

Home prices rise 10%, sharpest since '99

Buoyant prices largely attributed to high-end segment; consultants expect market to be more subdued but still active this year


(SINGAPORE) The latest flash estimate shows that housing prices were 10 per cent higher in the final quarter of 2006 than a year before - the biggest year-on-year rise since 1999.

Yesterday's figures from the Urban Redevelopment Authority were also 3.7 per cent up on the previous quarter, again the highest quarterly increase since 1999. And most analysts believe that when the URA releases the full official figures for last quarter they could be even higher than yesterday's preliminary ones.

Colliers International director (Research & Consultancy) Tay Huey Ying notes that the flash estimates take into account caveats lodged in the first 10 weeks of the quarter, supplemented by information on new units booked, so figures for 'hot projects' like Grand Duchess, The Ford @ Holland and Marina Bay Residences are probably not reflected.

'The final figure for Q4 to be released in about four weeks' time is likely to be closer to 4 per cent,' she said.

The buoyant price index is largely attributed to the high-end segment of the property market. Colliers' figures show that in Q4 2006, the price of luxury residential apartments increased by 9.8 per cent quarter-on-quarter (q-o-q). For the whole year, luxury prices increased by 35 per cent.

Yet, prices are expected to moderate this year. 'With the awards of the two integrated resorts having successfully taken place in 2006, the market is expected to be more subdued - although still active - in 2007 unless there are more surprise economy-boosting announcements by the government,' said Ms Tay.

The flash estimates are still open to interpretation though.Noting that the 10 per cent annual increase in the index is 'reminiscent' of earlier boom times, Knight Frank director (research & consultancy) Nicholas Mak says it could indicate the beginning of another 'bull run'.

'It is reminiscent of the recovery in 1999 but it appears to be more gradual and sustainable,' he added. The property boom of those times proved to be short-lived.

Still, Mr Mak qualifies that the 'characteristics' of the recovery in 1999 were quite different as that one was a 'bottom up' recovery. 'Now, we see the high-end influencing the mid-tier segment,' he said.

The mass market could take longer to recover. The Housing and Development Board also released flash estimates for its resale flats price index and it increased by just 0.9 per cent q-o-q.

The HDB resale price index can indicate the optimism of the mass market as those who resell HDB flats might upgrade to their first private property.

Mr Mak notes that performance in the mass market, with new launches like The Centris, was 'patchy'. 'We will need to see two more quarters of sustained HDB growth first,' he added.

ERA Singapore vice-president Eugene Lim does reveal, however, that there has been a significant increase in the number of people upgrading within HDB property, suggesting that for those in that income bracket, things are looking up.

According to the property firm's sales data, representing about 40 per cent of the HDB's resale market, transactions for larger five-room flats now account for 23 per cent of its total market transactions, while executive flats make up about 8 per cent.

This is up from 18 per cent and 5 per cent a year ago. Transactions for resale four-room flats fell from 41 per cent a year ago to 38 per cent today, while the proportion of resale three-room flats transacted went down from 33 per cent a year ago to 31 per cent.

Mr Lim believes that buyers of larger flats represent a new 'sandwich class' of price sensitive buyers, and it is hard to say whether their increased activity will eventually spill over to the mass market.

Mr Lim maintains that the latest flash estimate reflects that prices are still 'stabilising' and that any increase in HDB prices in 2007 will be between one and 2 per cent.

Launches of upcoming mass market developments will determine whether there will be a broad-based recovery. DTZ Debenham Tie Leung executive director Ong Choon Fah for one believes that these launches 'will stimulate demand'.

'There is latent demand there,' she said, maintaining that the previous drop in Q3 2006 in the resale price index was 'insignificant'. She did add that there is a 'need to match prices'.

Demand in 2007 is more likely to come from those who make gains from offering their properties for collective en bloc sale.

'The en bloc deals are going to push up the prices of those projects that are complete and unsold,' said Savills Singapore director (marketing & business development) Ku Swee Yong.

Perhaps most bullish of the analysts, Mr Ku even believes the property price index will end 2007 at around 155 points, up 19.2 per cent.

With additional reporting by Uma Shankari